Automotive News Europe — 2024-06-12
Automotive Industry
German automakers could face counter measures in China to the EU's new tariffs on Chinese EV exports to Europe. China is a key profit center for the companies.
The European Union's new tariffs of up to 38% on EVs exported to Europe from China were heavily criticized by German automakers.
Mercedes-Benz, BMW, and Volkswagen could face counter measures from the Chinese government that will impact their operations in China, which is a key profit center for the the companies.
BMW CEO Oliver Zipse said the EU tariffs will harm European companies and European interests. "Protectionism risks starting a spiral: Tariffs lead to new tariffs, to isolation rather than cooperation," he said.
"From the BMW Group's point of view, protectionist measures, such as the introduction of import duties, do not contribute to successfully compete on international markets," Zipse said in a statement.
Mercedes CEO Ola Kallenius said: "We do not need increasing barriers to trade. We should work on dismantling trade barriers in the spirit of the World Trade Organization."
Volkswagen said the tariffs will not achieve the EU's aim of strengthening the competitiveness of the European automotive industry.
"The timing of the EU Commission's decision is detrimental to the current weak demand for BEV vehicles in Germany and Europe. The negative effects of this decision outweigh any potential benefits for the European and especially the German automotive industry," VW said.
Germany's VDA industry body said the tariffs increase the risk of a trade war and will not strengthen the competitiveness of Europe's auto sector.
"The potential damage that could result from the measures may be greater than the potential benefits for the European and in particular the German automotive industry," VDA President Hildegard Mueller said in a statement.
'Excessive subsidies'
To combat what it called excessive subsidies available to Chinese automakers in China, the European Commission said it will apply additional tariffs ranging from 17.4% for BYD to 38.1% for MG owner SAIC starting in July 2024, on top of the standard 10% car duty.
Western producers including Tesla, BMW, Volvo and Renault's Dacia will also face tariffs on their exports to Europe from China. Tesla exports the Model 3 to Europe from China, while BMW exports China-built iX3 electric SUVs and Mini electric cars. Mercedes's Smart electric cars are built in China in a joint venture with Zhejiang Geely Holding Group.
The higher tariffs equate to billions of euros of extra costs for automakers at a time when they are struggling with slowing demand and falling prices at home, according to Reuters calculations based on 2023 EU trade data.
The Volvo Deputy CEO Bjorn Annwall said customers will end up paying more to buy EVs.
Volvo supports open and fair trade, Annwall said. "Anything that gets in the way of that is not a good thing," he told the Automotive News Europe Congress in Frankfurt on 12 June 2024.
Volvo, which is based in Sweden, is owned by China's Zhejiang Geely Holding. The automaker's full-electric EX30 is built in China and exported to Europe. The small SUV will also be built at Volvo's plant in Ghent, Belgium, starting in 2025.
European automakers are being challenged by an influx of lower-cost EVs from Chinese rivals. The European Commission estimates their share of the EU market has risen to 8% from below 1% in 2019 and could reach 15% in 2025. It says prices are typically 20% below those of EU-made models.
Some economists said the immediate effect of the additional duties would be very small in economic terms. The EU imported around 440,000 EVs from China in the 12 months ending in April 2024 worth €9 bn ($9.7 bn) or around 4% of household expenditure on vehicles.
The Kiel Institute for the World Economy has forecast that a 20% tariff, around the average extra to be imposed by the EU, would reduce Chinese EV imports by 25%, largely offset by higher production in Europe, although European carmakers would not necessarily fill the gap.
Chinese reaction
China's foreign ministry said it would take all necessary measures to "firmly safeguard" its legitimate rights and interests but did not mention any specific actions.
The Chinese Passenger Car Association seemed less concerned.
"The EU's provisional tariffs come basically within our expectations, averaging around 20 percent, which won't have much of an impact on the majority of Chinese firms," CPCA Secretary General Cui Dongshu said.
"Those exporting China-made EVs that include Tesla, Geely and BYD still have huge potential for development in Europe in the future," Cui said.
Chinese EV makers and suppliers are also starting to invest in European production, which would avoid tariffs.
BYD is building a new passenger car plant in Hungary and Chery Automotive has said it will starting producing cars in a former Nissan factory in Barcelona, Spain in 2024.
Stellantis has said it will build cars from its Chinese partner Leapmotor in Europe and sell them through its European retail network. Stellantis said the plans will not be affected by the new tariffs.
Beijing passed a law in April 2024 to strengthen its ability to hit back should the US or EU impose tariffs on exports of the world's No. 2 economy.
It has already launched an anti-dumping investigation into mostly French-made imports of brandy and French cognac producers are "deeply" worried about retaliation for EV tariffs, a trade body said on 12 June 2024.